Using AVAX and TRX Options to Hedge Spot and Generate Premium Income
Summary
The document introduces USDC-settled options on AVAX and TRX and explains call and put payoffs at expiration. Buyers pay a premium for the right, but not the obligation, to trade at a strike price; their maximum loss is that premium, while gains can be larger. The examples use puts to protect a TRX holding below a chosen strike and covered calls to collect premium on AVAX in exchange for capping gains above the call strike.
These examples illustrate the trade-offs rather than establish expected returns. A protective put preserves upside while limiting losses below its strike, with the premium reducing the protection’s net value. A covered call earns premium and lowers the effective cost basis, but leaves the holder exposed to declines and forfeits gains above the strike. The article also notes that contract sizes differ by token, settlement is in USDC, and AVAX and TRX tokens themselves are not yet supported as collateral. Strike and expiry selection depends on prices, views, and risk tolerance.
Key ideas
- A call gives its buyer the right to buy at a strike price, while a put gives the right to sell.
- Option buyers limit their loss to the premium paid but give up that amount even if the option expires unused.
- Protective puts can cap downside on a spot holding while preserving participation in price increases.
- Covered calls collect premium against spot holdings but limit gains above the call strike.
- AVAX and TRX options are USDC-settled, and each contract represents a different number of tokens.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.